CPSEs should include asset monetisation in MoUs with ministries

The government has said that central public sector enterprises (CPSEs) should include asset monetisation and market capitalisation improvement in their memoranda of understanding with respective ministries, in order to monetise non-core assets, reduce debt and improve efficiency. “You may have several non-core assets which are not yielding any returns to the company, and that can be monetized in terms of not only raising resources, but also repayments of debts,” TK Pandey, secretary in the Department of Investment and Public Asset Management (DIPAM) said on Friday. He was speaking at the CII PSE Summit via video conferencing.

“Idle assets do not contribute to Aatmanirbhar Bharat. Rather, all of our capital should be fully productive, and we should do it at the most efficient level,” he added. Pandey said CPSEs must take measures to address the low market valuation of their stocks, pointing to the 19% growth in the BSE CPSE Index versus the 50% growth in the Sensex and Nifty between March and November. “Is it due to something inherently problematic in the way we manage our companies or are there some issues in government policy that has led to this situation. We have to introspect and ensure that investors are equally rewarded and not short-changed,” he said. He stressed on the need for capital formation by sealing of sales by CPSEs and improving of asset turnover ratios. CPSEs should also look to keep return on equity and return on capital employed “high on the margin,” so as to better reward shareholders.

“CPSEs are into business, and therefore, any shareholder putting money has rightful expectations of return on capital employed and return on equity,” Pandey said. He added that CPSEs should also have a consistent dividend policy and give out interim dividends on a semi-annually or quarterly basis, rather than annually. DIPAM has also issued an advisory to all CPSEs to adopt a staggered payout of dividends. “Engagement of the CPSE top management with the investing community is extremely important,” he said, adding that investors will reward companies with better share prices.

Public sector investments have to take the lead to revive the economy at a time when public sector appetite has been relatively lukewarm, he added. On the current disinvestment scenario, Pandey said that strategic disinvestments should be undertaken wherever possible to move towards a more competitive economy. Initial public offerings (IPOs) will continue to remain a priority of the government, he said.

“We hear the markets that Exchange Traded Funds (ETFs) are not the preferred mode of disinvesting, hence the government will not prefer go through this route,” he added. The government has set a disinvestment target of Rs 2.1 lakh crore for the ongoing fiscal year, of which Rs 1.2 lakh crore is expected from strategic divestments.